The UK also needs to confront the costs of Public Sector pensions . . .

[TorquayFan]

Yesterday, "Years of complacency have pushed Britain into a hole from which it will be extremely expensive to escape".

 

The cost of Public Sector pensions stands at about £49 billion p.a. which added to the costs of State OAPs, £124 billion, gives a total of £173 billion, more than is spent on the NHS annually. And let's remember, "These government pensions are not “funded”: the Government has not put any money aside for them, so all the promises have to be paid for out of current income."

 

'Defined benefit' schemes that were once available in the Private Sector have largely disappeared over many decades, because they were in essence, totally unaffordable. But almost 6 million workers in the Public Sector still have gold plated schemes - doctors, nurses, armed forces, police, civil servants and teachers, (some of these can retire much earlier than 67! ).

 

UK Government borrowings last year were £119 billion or about £1,750 per person, that's living above our income, each year. Outstanding UK Govt debt approaching £3 trillion equates to £44,000 for each man, woman and child.

 

Looking at the tax burden for Pensions alone, for each of our 33 million working population, each worker has to contribute £5,242 in taxes to pay for pensions alone. Average income stands at about £33K. Given that people are happily living longer and demographics are going top-end as birth rates fall, its frankly madness to think these costs are sustainable.

 

Figures are boring I know but unfortunately, there is no other way of making the case. I was suggesting on another thread that the triple lock has to go but it's not the only problem with pensions. if anyone reads this, I doubt these thoughts get many admirers, which gives emphasis to the idea that it's sometimes hard to do the necessary in democracies.

 

Worth the read IMO, even though it's the DT https://www.telegraph.co.uk/business/2024/03/28/great-pension-reckoning-coming-money-almost-run-out/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Denim]

I could suggest where the government could save 8 million pounds a day to help with meeting its other obligations but it would be like trying to stop water flushing down the toilet after the chain has been pulled.

[TorquayFan]

Come on Denim - DO suggest, please.

[Denim]

https://www.theguardian.com/uk-news/2023/sep/19/cost-housing-asylum-seekers-hotels-rise-home-office#:~:text=The annual report%2C published on,over £3bn a year.

[TorquayFan]

OK thanks. Well, that's a start

[CharlieKo]

I thought the government was going to do away with the state pension. People coming into the workforce now have to in role into a private/ company pension scheme. So eventually the state pension costs reduce and then disappear As those receiving state pension die off.

 

[noobexpat]

6 minutes ago, CharlieKo said:

I thought the government was going to do away with the state pension. People coming into the workforce now have to in role into a private/ company pension scheme. So eventually the state pension costs reduce and then disappear As those receiving state pension die off.

 

 

Many smaller employers are paying the minimum contribution into "auto-enrolment" schemes. The combined total is a measly 8% of qualifying earnings.

 

For average folks this will not amount to much in retirement and therefore state pension can't be abolished. It has periodically been reducing in value over many years though.

 

With 28 years until my state pension, who knows what it will look like. But luckily i don't particularly care.

 

 

[noobexpat]

At least the final salary method has been dropped by, i think all public sector schemes, and replaced by career average. 

[CharlieKo]

25 minutes ago, noobexpat said:

 

Many smaller employers are paying the minimum contribution into "auto-enrolment" schemes. The combined total is a measly 8% of qualifying earnings.

 

For average folks this will not amount to much in retirement and therefore state pension can't be abolished. It has periodically been reducing in value over many years though.

 

With 28 years until my state pension, who knows what it will look like. But luckily i don't particularly care.

 

 

Tell me if I'm wrong, But aren't National insurance contributions around 2% or qualified earnings? As for the pension can't be abolished! I beg to disagree. The same with the NHS at some stage the government will have to look at other funding methods. I think people will have to take out some sort of insurance to cover any medical needs. The government can't just keep poring funds into a black hole which both the NHS and state pension is. They just don't have the ball's to be honest with the people.

[noobexpat]

18 minutes ago, CharlieKo said:

Tell me if I'm wrong, But aren't National insurance contributions around 2% or qualified earnings? As for the pension can't be abolished! I beg to disagree. The same with the NHS at some stage the government will have to look at other funding methods. I think people will have to take out some sort of insurance to cover any medical needs. The government can't just keep poring funds into a black hole which both the NHS and state pension is. They just don't have the ball's to be honest with the people.

 

NI has multiple types of contributions, but its 10% for employees. Also the employer pays NI conts.

Only a part of that is allocated towards state pensions, but as its an unfunded system, you can't just say "3 out of 10% is for state pension". Its whatever it costs and is fluid.

 

Until people are saving real money each month, which most can't or won't ...state pension is simply viewed as the underpin to mitigate poverty in retirement.

 

State pension has been around since 1948 and was setup for those who finished working in cotton mills, with no savings. It has some deep mentality in the UK. The level of entitlement that old folks have towards it is also quite extreme.

 

 

[CharlieKo]

43 minutes ago, noobexpat said:

The level of entitlement that old folks have towards it is also quite extreme.

 

Understandable when all some have is the state pension. Yet the UK provides the worse pension compared to some EU countries. Not to mention the triple Lock on pensions is buying the vote!  

[roo860]

13 minutes ago, CharlieKo said:

 

Understandable when all some have is the state pension. Yet the UK provides the worse pension compared to some EU countries. Not to mention the triple Lock on pensions is buying the vote!  

In other EU countries doesn't it go on how much of your salary is contributed into the Government pension, do UK workers contribute less?

[noobexpat]

17 minutes ago, CharlieKo said:

Yet the UK provides the worse pension compared to some EU countries. 

 

That doesn't really make sense because it can't really be calculated.

You need the holistic revenue that a country collects versus what it gives back. A fruitless task. 

 

The uk could have the best state pension on earth ...you just have to take funds from somewhere else (which gets the immigration ranters into top gear 555)

 

 

[noobexpat]

14 minutes ago, roo860 said:

In other EU countries doesn't it go on how much of your salary is contributed into the Government pension, do UK workers contribute less?

 

Largely irrelevant.

Its just re-shuffling of government revenue.

A really generous state pension could mean worse hospitals, schools and roads. 

 

Improving life expectancy has had big cost implications on these 'promise-based' state pensions.

 

 

[CharlieKo]

59 minutes ago, noobexpat said:

Largely irrelevant.

Its just re-shuffling of government revenue

Which is basically diminishing funds. Which in turn means it can't go on indefinitely. Sooner or later funds run dry and the only way to keep  funding is through insurance for NHS and Pensions. Or money printing! But the UK government still thinks it is an international player, so is funding lost causes like Ukraine and yes throwing money at illegal immigrants rather than turning the boats around. Or pissing money away on things like the HS2 or what ever it's called.

 

[noobexpat]

2 minutes ago, CharlieKo said:

Which is basically diminishing funds. Which in turn means it can't go on indefinitely. Sooner or later funds run dry and the only way to keep  funding is through insurance for NHS and Pensions. Or money printing! 

 

Not sure about diminishing ...maybe GDP is useful data for this??  

Imagine oil and banks and our giant service industry has a great year - bumper corporation tax, for example.

 

All into one big pot. As long as the books balance, the status quo can largely continue.

 

Maybe the younger generation won't feel so entitled to state pensions and then something can change.

[TorquayFan]

Hi Noob.

 

You write, "As long as the books balance, the status quo can largely continue."

 

The point is that the books DON"T balance ! Last year 2023, the Govt spent £119 billion more than they took in tax, equating to £1,750 per person, i.e. each man, woman, child living beyond our means. But that spending does include substantial payments on Govt. debt which will reduce if interest rates fall.

 

Re. GDP there is no growth on the horizon yet so no remedy available there.

 

We should have listened to Mr Micawber  😉

[CharlieKo]

17 minutes ago, noobexpat said:

 

Not sure about diminishing ...maybe GDP is useful data for this??  

Imagine oil and banks and our giant service industry has a great year - bumper corporation tax, for example.

 

All into one big pot. As long as the books balance, the status quo can largely continue.

 

Maybe the younger generation won't feel so entitled to state pensions and then something can change.

 

Judging by what is happening in the EU and UK, I would say GDP hasn't been as good as wanted the printing of money etc doesn't help. I understand the UK is in dept for over 1 trillion GBP. This all has to be paid back. Higher taxes, cutting back of services etc. At some stage it will all come to a shuddering halt. Governments are the worse managers of finance.  

[TorquayFan]

Hi Charlie. Sorry but UK Govt. debt is approaching £3 trillion equating to £44,000 approx for every man, woman and child. More than £150,000 for every 4 person family. Financed by borrowings and the printing of money.

 

 

 

 

[noobexpat]

41 minutes ago, TorquayFan said:

Hi Noob.

 

You write, "As long as the books balance, the status quo can largely continue."

 

The point is that the books DON"T balance ! Last year 2023, the Govt spent £119 billion more than they took in tax, equating to £1,750 per person, i.e. each man, woman, child living beyond our means. But that spending does include substantial payments on Govt. debt which will reduce if interest rates fall.

 

Re. GDP there is no growth on the horizon yet so no remedy available there.

 

We should have listened to Mr Micawber  😉

 

Maybe a rolling 5 years is a better measurement?

No denying govt debt keeps rising, as long as it can be serviced, i don't know if its a problem ...every country the same, i imagine.

 

Inflation apparently erodes that debt and a country can 'grow' its way out of it as i think debt is expressed against gdp. Economics not my forte though!

 

[theoldgit]

5 hours ago, TorquayFan said:

Defined benefit' schemes that were once available in the Private Sector have largely disappeared over many decades, because they were in essence, totally unaffordable. But almost 6 million workers in the Public Sector still have gold plated schemes - doctors, nurses, armed forces, police, civil servants and teachers, (some of these can retire much earlier than 67! ).

This “story” rears its head every year or so, including the allegation that the Civil Service Pensions are unfunded, which isn’t strictly correct.

 

Some public service employees, certainly the police and maybe others, have always paid towards their pension pots.

 

Other Civil Servants, including me, were traditionally paid a lower salary than their private sector equivalents to take account of the cost of providing a “free pension”, sadly the Governments of the day didn’t pay these savings into a pension fund but used them for every day spending, this borrowing has to be paid back.

 

It’s also worth noting that Civil Servants regularly had their salaries frozen during various Government spending cuts.

 

I worked for the Government for forty years, l was able to retire at 60 with a pension of 50% of my final salary, l concede that it’s reasonably good but l worked pretty hard for it.

 

As the article says, final salary schemes are no longer available to Civil Servants, contributions are actually deducted from salaries, that doesn’t necessarily mean those deductions are paid into pensions pots, and the concession to retire at 60 is long gone-

 

l personally don’t think that the terms and conditions can be changed retrospectively, at least l hope note, MP’s are on the same scheme and l can’t see them voting for it.

[TorquayFan]

Hello TOG and thanks for the reply.

 

Civil Service Pensions are funded, by the Govt from current tax take, broadly the same as the other state pensions.

 

With respect - in your 3rd para you claim that CS have traditionally been paid less than the Private Sector. IMO that's a stretch of the imagination and you have to remember that most CS have a much more secure tenure than PS. To contend that the 'savings' made can justify the gold plated pension schemes because it is in the nature of a 'borrowing to be paid back', is a strange idea.

 

Sorry to hear about pay freezes affecting CS, I remember these too as a PS worker with redundancies, closures and commercial strains to cope with too.

 

Good for you with a 50% pension and retiring at 60, you benefited from the best of times.

 

But at the moment, such benevolence is paid for mainly by working people's taxes, many of whom are young and burdened with Student Loans, struggling to pay rent or to be able to reach out to buy the humblest home for themselves.

 

All good fun.

 

 

 

[noobexpat]

1 hour ago, theoldgit said:

This “story” rears its head every year or so, including the allegation that the Civil Service Pensions are unfunded, which isn’t strictly correct.

 

l personally don’t think that the terms and conditions can be changed retrospectively, at least l hope note, MP’s are on the same scheme and l can’t see them voting for it.

 

You are confusing unfunded with non-contributory.

 

Correct they cannot be changed retrospectively, the terms of your accrual to date cannot be unwound, only future accrual terms amended.

[TorquayFan]

No I'm not Noob. CSP are funded by the Govt. whatever the contributory structure.

[Baht Simpson]

5 hours ago, noobexpat said:

The level of entitlement that old folks have towards it is also quite extreme.

 

 

It's bizarre that a pension that is based on contributions by individuals and companies over the course of a working lifetime is seen by you as an extreme sense of entitlement. It's actually a real entitlement. It's not charity. I don't know of anyone that feels they are entitled to anything more than the years they have contributed. 

 

 

[theoldgit]

Hi TF, you are indeed correct to say that current pensions are paid from the current tax take, but as I pointed out that’s because the abatement of salaries which should should have gone into pension pots was used for current day spending at the time. That may seem to be far fetched, but sadly how it worked, l have personal experience of “Budget Challenge” meetings with Treasury Officials where this was past of the negotiations, believe me meetings with Treasury Officials are indeed challenging.

 

It’s probably worth pointing out that NHS funding also comes from general taxation not, as you might expect, from NI Contributions, a point that was made by the relevant Ministers correspondence unit when l called foul of the Cameron/Clegg introduction of 150% of cost charge for NHS treatment for expat pensioners. They reminded me that the NHS wasn’t funded by from the NI fund but from general taxation, a fact that l was already aware of.

 

My claim that some private sector salaries are higher is based that some of my former colleagues jumped ship and went to the private sector when some Home Office functions were contracted out and were paid substantially more, l stayed put.

 

l do have sympathy the the current day taxpayers, including you and I, eventually all of us gold plated pensioners will die off and the problem will be solved.

[CharlieKo]

4 hours ago, TorquayFan said:

Hi Charlie. Sorry but UK Govt. debt is approaching £3 trillion equating to £44,000 approx for every man, woman and child. More than £150,000 for every 4 person family. Financed by borrowings and the printing of money.

 

 

 

 

 

I thought it might be higher, but wasn't sure to the amount. 

[TorquayFan]

Charlie - thanks for reply and it is easy to not get it, because the figures are mind bending. My sophisticated technique, I write the trillions etc down with requisite noughts, eliminate as many noughts in the sum as poss., then do the sum on my phone. I'm a high tech Guy LOL

 

BTW please check the sums. ATB

[noobexpat]

4 hours ago, Baht Simpson said:

It's bizarre that a pension that is based on contributions by individuals and companies over the course of a working lifetime is seen by you as an extreme sense of entitlement. It's actually a real entitlement. It's not charity. I don't know of anyone that feels they are entitled to anything more than the years they have contributed. 

 

 

Its wakey-up time.

 

What type of plan is it, when you contribute a fixed amount and get a guaranteed income for life?

 

You remember all those employer schemes that closed because they were unaffordable and unsustainable. Now you see it??

[TorquayFan]

Baht. However the contributions are assembled over the years, the fact is that the OAP and PS pensions come out of our current tax takes each year. The Country has never been able to tuck it away for each of us in a bucket. It's not a private pension where broadly this stuff does happen.

 

The wider view is that it's no good us complaining about it, had the Govt in any of these schemes tucked the money aside as we might have wished, then other taxes would have had to rise substantially.